"PROJECT UGANDA" - Why Was A UBG Bank Executive Employed As 1MDB's Investment Manager During PetroSaudi's Loan And Buy Out Negotiations?

"PROJECT UGANDA" - Why Was A UBG Bank Executive Employed As 1MDB's Investment Manager During PetroSaudi's Loan And Buy Out Negotiations?

Nik Faisal Ariff Kamil, featured as the Executive Director of Investments for UBF in the UBG 2008 Annual Report

Nik Faisal Ariff Kamil, featured as the Executive Director of Investments for UBG in the 2008 Annual Report

Documents available to Sarawak Report highlight the key role played by a well-known contact of the tycoon Jho Low, called Nik Faisal Ariff Kamil, during the company PetroSaudi International’s negotiations to raise a further billion dollars in loans out of 1MDB in the course of 2010.

This was the same period during which PetroSaudi was also negotiating to buy out the Taib controlled bank, UBG.

At the time Nik Faisal was 1MDB’s Chief Investment Officer.

But, astonishingly, he also held the post of Executive Director of Investments for UBG.

Jho Low, meanwhile, was a member of the Board of the bank, having headed a substantial share acquisition a few months earlier.

Correspondence shows that Nik Faisal was looped into extensive discussions with PetroSaudi over what was described as “Project Uganda”.

This project appeared to be focused around the loans to PetroSaudi and also the buy out of UBG – given that the correspondence on “Project Uganda” email network referred to both these topics only.

It raises questions over whether Nik Faisal was essentially UBG’s ‘man inside’ 1MDB at this crucial negotiating time – acting as an effective cat’s paw for Jho Low?

Chief Investment Manager at 1MDB during 2009

Chief Investment Manager at 1MDB during 2009 – previously he was at a “leading national investment institution”

These two executives from 1MDB are still working at UBG?

Nick Faisal and his senior colleague Jasmine Ai Swan Loo both moved to 1MDB, yet they are still registered as part of UBG’s key executive team – did Nik come over on ‘secondment’ to 1MDB during 2009?

Jho Low’s UBG connection

In 2008 the Jho Low controlled company Majestic Masterpiece was issued a major share in the the Taib family owned bank, following a share swap deal, involving the purchase by UBG of shares in the highway construction company Putrajaya Perdana Berhad.

How Majestic Masterpiece acquired a huge chunk of UBG bank in a restricted share issue in July 2008

How Majestic Masterpiece acquired a huge chunk of UBG bank in a restricted share issue in July 2008

Low, who claimed he had a personal stake in the venture, then joined the board at UBG, which had been seeking a buy out for some time.

Nik Faisal was UBG’s Executive Director of Development at the time and is known to be close to Jho Low. He is now a Director of another highway construction company called Prolintas, which has received the contract to build the Damansara-Shah Alam Elevated Expressway.

Jasmine Loo Ai Swan, UBG's Legal & Compliance Director

Jasmine Loo Ai Swan, UBG’s Legal & Compliance Director

However, he also remains a Director of UBG, according to Bloomberg.

Likewise, another key UBG colleague Jasmine Loo Ai Swan, who was the bank’s Legal & Compliance Executive Director, also joined 1MDB as Executive Director Group Strategy, in March 2011.

However, she too appears to have retained her position at UBG bank and also as a Director of Putrajaya Perdana Berhad.

SRC Connection

Nik Faisal’s connections to Jho Low and the mysterious transactions linked to 1MDB have already attracted considerable comment, because of his role as the Director and Manager of another highly controversial government owned company called SRC Sdn Bhd.

SRC originally belonged to 1MDB and it took out a loan of RM4 billion from the Malaysian public’s Old Age Pension fund, Kumpulan Wang Persaraan.

Critics have repeatedly demanded to know the details of this transaction and what the money was for. However, information about the deal was removed from the 1MDB accounts through the transfer of the company to the direct ownership of the Finance Ministery in 2012.

Till this date the Ministry has failed to present SRC’s own illegally outdated accounts and the details have remained hidden.

UBG key executives were also key executives at 1MDB

Our evidence raises a clear conflict of interest therefore, in that Nik Faisal was working right inside 1MDB as its Chief Investments Officer throughout 2010, at the very time PetroSaudi was negotiating two further loans from the fund and was also engaged in buying out UBG bank.

Documents make clear that two further PetroSaudi loans totalling USD$1 billion (on top of the original $1 billion already invested through the joint venture in 2009) were drawn from 1MDB on 26th July and 8th September 2010.

Meanwhile PetroSaudi’s buy-out of UBG, which was announced in January, was completed in late September 2010.

Nik Faisal Ariff Kamil was continually consulted by PetroSaudi executives throughout this period, as the documents make clear, and he was the leading figure at the bank in the day to day negotiations over the raising of the loans.

He is referred to in emails as 1MDB’s Chief Investment Officer and enjoyed the email address: [email protected]:

From: Patrick Mahony
To: Nik Faisal Ariff Kamil
Date: Thu, 9 Sep 2010 13:47:42 +0200
Subject: RE: Signed Docs

Attachment(s): 2

Nik – please find attached revised docs. Many thanks

—–Original Message—–

From: Nik Faisal Ariff Kamil [mailto:[email protected]] Sent: 09 September 2010 00:02
To: Patrick Mahony
Subject: Re: Signed Docs

Thanks

Nik Faisal Ariff Kamil
Chief Investment Officer
1Malaysia Development Bhd
C +6016 2072855

—– Original Message —–

From: Patrick Mahony <[email protected]>
To: Nik Faisal Ariff Kamil
Sent: Thu Sep 09 02:52:21 2010
Subject: RE: Signed Docs

Nik,

As per my email below, attached please find all of the signed documents.

Best,

Patrick

—–Original Message—–

From: Patrick Mahony

Sent: 08 September 2010 06:19

To: Nik Faisal

Subject: Signed Docs

Dear Nik,

This is to confirm that all docs have been signed and have been couriered to you. We will also send you pdf versions later today. Please kindly execute wire transfer of usd500m in the accounts I mentioned for value today, 8 September.

Many thanks and best regards,

Patrick

The “attached” documents referred to by PetroSaudi’s Patrick Mahony in the above email exchange referred to the so-called ‘draw down’ notices, through which the company availed itself of lending from 1MDB under the terms agreed when the joint venture was turned into a murabaha loan agreement, June 14th 2010.

The September transaction was the second of two draw downs in 2010 – one on July 26th for USD$500 million and one on September 8th 2010, both for USD$500 million, according to the documents.

In the week before the earlier July transfer by 1MDB, PetroSaudi’s Patrick Mahony had messaged Jho Low:

“Sent drawdown notice to nik. It is on uganda”

The Documents:

Virtually identical documents were sent between the players involved in Project Uganda for both the separate ‘draw downs’ of $500 million by PetroSaudi from 1MDB.

From: Patrick Mahony
To: Nik Faisal Ariff Kamil
Date: Thu, 9 Sep 2010 13:47:42 +0200
Subject: RE: Signed Docs

Nik – please find attached revised docs. Many thanks

SEE ATTACHMENT

From:
1MDB PetroSaudi Limited
Kingston Chambers
PO Box 173
Road Town
Tortola

British Virgin Islands

To:
1Malaysia Development Berhad
Level 21, Suite 12.01
The Gardens South Tower
Mid Valley City Lingkaran Syed Putra
59200 Kuala Lumpur
Malaysia

8 September 2010

Letter of Agreement and Notice of Request for Additional Tranche

We refer to the murabaha financing agreement made between you and us and dated 14 June 2010 pursuant to which the Parties agreed, inter alia, that you would make available a murabaha facility to us upon the terms and conditions set out therein (the “Murabaha Financing Agreement”).

Unless otherwise stated in this letter of agreement (the “Letter”), all capitalised terms not defined in this Letter and all clause references shall be given the same meaning and interpreted in the same manner as in the Murabaha Financing Agreement. In addition, the term “Effective Date” shall mean the date on which this Letter is agreed to and acknowledged by you by your countersignature of this Letter.

  1. Pursuant to the terms of the Murabaha Financing Agreement, the Parties agreed that the Additional Tranche may be utilised by us for the purpose set out in Clause 2.1(b) (Additional Tranche) thereof, namely to finance the purchase of Commodities from the nominated Suppliers by way of one or more Transactions (the “Additional Tranche Purpose”). The Parties agreed that in respect of any Transaction, we would use all proceeds we receive from the sale to a buyer of any Commodities purchased under the Transaction as working capital for capital expenditure. The process for the purchase and subsequent sales of the Commodities are set out in Clauses 5 (Purchase by Seller), 6 (Sale to Purchaser) and 7 (Agency Appointment) of the Murabaha Financing Agreement (the “Commodities Process”).
  2. Notwithstanding the provisions of the Murabaha Financing Agreement in respect of the Additional Tranche Purpose and the Commodities Process, we hereby request that the Additional Tranche is made available by you directly to us in one or more drawings without regard to the Commodities Process, such drawings to be utilised by us as working capital for capital expenditure and to be made in accordance with the drawing procedure set out in paragraph 5 of this Letter.
  3. In order to implement the request referred to in paragraph 2 of this Letter, we hereby request your agreement to the following with effect from the Effective Date:

(a)        that any clauses relating to the purpose of the Additional Tranche or the Commodities Process be disapplied and instead the purpose of the Additional Tranche be construed in accordance with paragraph 2 of this Letter;

(b)       that the definition of “Transaction” be construed as a drawing under the Additional Tranche in accordance with the drawing procedure set out in paragraph 5 of this Letter and the definition of “Settlement Date” be construed as the date upon which the relevant Transaction is drawn down by us;

(c)        that the Deferred Price applicable to a Transaction (as such term is construed in accordance with paragraph 3(b) of this Letter) and payable on a Deferred Price Payment Date be the amount of such Transaction;

(d)       that the Profit applicable to a Transaction (as such term is construed in accordance with paragraph 3(b) of this Letter) be calculated by applying to the outstanding Transaction the profit return rate referred to in the definition of “Murabaha Profit” in the Murabaha Financing Agreement (based on the outstanding amount of such Transaction); and

(e)        that any defaults and breaches of any Finance Document that are solely triggered by the matters contemplated in paragraph 2 of this Letter be waived in all respects for all time.

  1. In addition, we refer to the provisions of Clause 2.7 (Availability of Additional Tranche) of the Murabaha Financing Agreement and pursuant thereto we wish to request for the full amount of the Additional Tranche to be made available to us. For the purposes of the Murabaha Financing Agreement, this Letter shall be designated as an Additional Tranche Request. By countersigning this Letter below, you agree to the making available of the full amount of the Additional Tranche and this Letter shall be an Additional Tranche Confirmation Notice for the purposes of Clause 2.7 (Availability of Additional Tranche) of the Murabaha Financing Agreement.
  2. Upon your countersignature of this Letter, the full amount of the Additional Tranche shall be made available to us in one or more Transactions (as such term is construed in accordance with paragraph 3(b) of this Letter) and the provisions of Clauses 3.1 and 3.2 of the Murabaha Financing Agreement shall apply to such Transactions save that:
  • references to “Purchase Order with Unenforceable Promise to Purchase” shall be construed as being references to an irrevocable notice of drawing, and for such purpose we attach at Annex A hereto a completed notice of drawing for an amount of US$500,000,000;
  • the aggregate amount of the Transaction together with any previous Transactions does not exceed the Additional Tranche Amount; and
  • Clauses 3.2(c) and 3.2(d) shall be disapplied.
  1. Following the Effective Date, the Murabaha Financing Agreement shall remain in full force and effect and the provisions thereof shall not be amended or waived in any way whatsoever other than as stated herein, and in particular, Clauses 2.6 (Payments) and 8 (Prepayments, Reduction, Cancellation and Reconversion) shall remain in full force and effect, except as amended hereby. In addition, the Parties agree that as of the occurrence of the Effective Date, the departure from the Additional Tranche Purpose and the Commodities Process will not form the basis of any claim by any Party including as to the validity and/or enforceability of the Murabaha Financing Agreement.
  2. This Letter shall be designated a Finance Document for the purposes of the definition of “Finance Documents” in Clause 1.1 of the Murabaha Financing Agreement.
  3. By countersigning this Letter below, you hereby warrant to us that you have received all corporate, regulatory and other approvals and consents required for the purposes of entering into the transactions contemplated by this Letter and the Murabaha Financing Agreement, as amended by this Letter.
  4. Clauses 15 (Notices) and 25 (Counterparts) of the Murabaha Financing Agreement shall apply mutatis mutandis as if set out in full in this Letter. Notwithstanding the provisions of Clause 18.2 (Amendment costs) of the Murabaha Financing Agreement, the provisions of Clause 18.1 (Transaction Expenses) thereof shall apply to this Letter.
  5. This Letter, including any non-contractual obligations arising out of or in connection with this Letter, is governed by the laws of England.

Please acknowledge your receipt of this Letter, and confirm your agreement to the above by signing and returning the enclosed counterpart of this Letter.

Yours faithfully

This Letter has been executed and delivered as a deed on the date which appears on the first page of this Letter.

Executed as a deed by 1MDB PETROSAUDI LIMITED acting by its authorised signatory who, in accordance with the laws of the British Virgin Islands, is acting under the authority of 1MDB PetroSaudi Limited  ………………………………………………………….Tarek ObaidDirector

 

We, 1MALAYSIA DEVELOPMENT BERHAD, acknowledge receipt of this Letter and we hereby confirm our agreement to, and undertake to be bound by, the terms and conditions set out in this Letter.

NOTICE OF DRAWING

 

ANNEX A:

ANNEX A

NOTICE OF DRAWING

To:   1MALAYSIA DEVELOPMENT BERHAD

From: 1MDB PETROSAUDI LIMITED

Date:     23 July 2010

Murabaha Financing Agreement dated 14 June 2010 between 1MDB Petrosaudi Limited and 1Malaysia Development Berhad, as amended from time to time (the “MFA”)

  1. We hereby give notice in accordance with Clause 3.1 of the MFA that we wish to make a drawing under the Additional Tranche, such drawing to be made as follows:

(a)        Amount:                      US$ 500,000,000

(b)       Drawdown Date:        26 July 2010.

  1. Upon the full amount of the Additional Tranche becoming available to us pursuant to the provisions of Clause 2.7 of the MFA, this notice is irrevocable.
  2. The Amount should be credited on the Drawdown Date as follows:

(a)       Amount:                                  US$ 340,000,000

Pay to:                                    Chase Manhattan Bank New York

ABA:                                      021000021

Swift:                                      CHASUS33

Account:                                 001-1-008182

In favor of:                              J.P. Morgan (Suisse) SA

Swift:                                      MGTCCHGG

For further credit:                   7619400

(b)       Amount:                                  US$ 160,000,000

Pay to:                                    Chase Manhattan Bank New York

ABA:                                      021000021

Swift:                                      CHASUS33

For Account of:                      RBS Coutts Bank Ltd, Zurich

Swift:                                      COUTCHZZ

In Favor of Account:              11116073.2000

IBAN:                                     CH7308620111160732000

  1. Terms defined in this notice have the same meaning as in the MFA.

In each case the documents (see Annex A from the earlier July agreement) show that the staff at 1MDB divided the payments into separate accounts.

Annex A - during the September negotiations two options were offered to 1MDB to divide either 300/200 or 320/160 - since the $40 million could be 're-balanced' later

Annex A – during the September negotiations two options were offered to 1MDB to divide either 300/200 or 320/160 – since the $40 million could be ‘re-balanced’ later

With regard to the payment of both tranches it can be seen that of USD$500 million $340 million was sent to PetroSaudi’s own working account at JP Morgan in Geneva and $160 million was sent to the RBS Coutts account belonging to the company Good Star in Zurich, which was controlled by Jho Low.

The documents relating to the Murabaha agreement were sent by PetroSaudi’s Patrick Mahony to the email addresses at “Project Uganda” in May 2010.

These included a copy of the agreement; a copy of PetroSaudi’s “Letter of Guarantee” to pay back the marabaha loan and a copy of a “Letter of Agreement”, whereby the PetroSaudi owned company 1MDB PetroSaudi agreed, as part of the deal, to buy out 1MDB’s shares in the original Joint Venture.

These documents show that PetroSaudi were nominally paying USD$1.2 billion for the 1MDB shares, providing a nominal profit to 1MDB of $200 million.

However, this was translated into a loan to PetroSaudi and the agreement provided for a further USD$1,5 billion of potential borrowing “with a maximum aggregate amount of United States Dollars two billion and seven hundred million (USD 2,700,000,000)”:

Patrick Mahony
To: Project Uganda
Date: Tue, 4 May 2010 15:08:58 +0200
Subject: FW: 1MDB Docs

Attachment(s): 3

DOCUMENTS – Murabaha Loan Agreement
PetroSaudi “letter of guarantee”
“letter of agreement” between PetroSaudi and 1MDB

The inevitable concern is why did this Government run fund, chaired by the Prime Minister, allow such a clear conflict of interest amongst its most senior members of staff who were negotiating these vast loans to a company with an extremely limited asset base?

Effectively, these executives at 1MDB were negotiating to lend public money to PetroSaudi at the very same time that PetroSaudi was negotiating to buy out their own bank UBG.

1MDB and PetroSaudi have consistently and continually denied that any money from 1MDB went into the UBG bank buy out, from which it has been speculated that Jho Low himself made a very handsome profit of several million ringgit.

To the contrary, the Malaysian media were encouraged to disseminate that PetroSaudi was a “cash rich” company “owned by the Saudi Royal family” and close to the Saudi Government, which was “ultimately investing in Malaysia”, all thanks to the growing close ties of the Saudi Royal Family with Prime Minister Najib Razak’

Spinning the press in Malaysia about "cash rich" PetroSaudi

Spinning the press in Malaysia about “cash rich” PetroSaudi

But, if this was the case, then what relevance did the details of the 1MDB loan agreements with PetroSaudi have to the UBG buy out and why were they sent to the team at Project Uganda?

However, Sarawak Report has now demonstrated that little of this media spin of the time was true.  PetroSaudi was a company with a limited cash base, which was borrowing from Malaysia to the tune of billions of dollars, rather than investing in the country.

Project Uganda press release on UBG buy out deal

This media campaign and image building around PetrSaudi appears to have been deliberately orchestrated by the team at Project Uganda, based at 1MDB and PetroSaudi.

Significantly, in one example, the Project Uganda team were clearly collaborating over a press release about initial announcement by UBG bank of the buy out offer by PetroSaudi in January 2010.

From: Project Uganda
To: Patrick MahonyTarek Obaid
Date: Mon, 11 Jan 2010 08:41:24 +0800
Subject: RE: PetroSaudi Invests RM1.4 billion in Malaysia to show confidence in Government

Attachment(s): 1

MONDAY, 11 JANUARY 2010

PRESS RELEASE

PETROSAUDI INTERNATIONAL LIMITED MAKES RM1.4 BILLION FOREIGN DIRECT INVESTMENT ON ITS OWN TO REAFFIRM ITS CONFIDENCE AND COMMITMENT TO THE ECONOMIC PROSPECTS OF MALAYSIA

  1. BACKGROUND
  • On 29 December 2009, Majestic Masterpiece Sdn Bhd (“MMSB”), Concordance Holdings Sdn Bhd (“CHSB”) and PPES Works (Sarawak) Sdn Bhd (“PPES”) received letters of offer from PetroSaudi International Ltd. (“PSI”) to acquire all of UBG Berhad (“UBG”) shares held by the 3 parties for a cash consideration of RM2.50 per share.
  • MMSB is a wholly-owned subsidiary of Abu Dhabi-Kuwait-Malaysia Investment Corporation (“ADKMIC”), whose shareholders include prominent Middle-Eastern investors, had in 2008 became the major shareholder of UBG with a 52.62% interest or 263,307,474 shares in UBG.
  • CHSB, a wholly-owned subsidiary of Cahya Mata Sarawak, holds 141,558,155 shares in UBG, representing a 28.29% interest.
  • PPES, a 51% subsidiary of Cahya Mata Sarawak, holds 44,652,000 shares of UBG, representing an 8.92% interest.
  • On 8 January 2010, MMSB and CMS (based on their announcement) accepted the offers from PSI to dispose of their respective entire equity interests in UBG, subject to, inter-alia the approval of their respective shareholders. PetroSaudi International Limited (“PetroSaudi”) is an investment holding company with its head office in the Kingdom of Saudi Arabia.
  • PetroSaudi main focus is in energy, construction and other strategic projects in various regions around the world, leveraging on its indepth knowledge of complex global systems that define the various industries. PetroSaudi distinguishes itself by forging strong relationships in every country in which it performs business. An example is in 2009, PetroSaudi formed a USD2.5bn joint-venture with 1MDB of Malaysia to focus on projects that encourage sustainable economic development within and outside of Malaysia to promote FDI into Malaysia.
  • Upon completion of the acquisitions by PSI from MMSB, CHSB or PPES that result in PSI holding more than 33% of UBG shares, the obligation will be triggered by PSI to undertake a mandatory take-over for all the remaining ordinary shares in UBG not already held by PSI.
  • Once an MGO is triggered at UBG level, PSI will automatically trigger an obligation to undertake a mandatory take-over for all the remaining ordinary shares in Putrajaya Perdana Berhad (“PPB”) and Loh & Loh Corporation (“LLCB”) not presently held by UBG.
  • The “downstream” take-over offers of PPB and LLCB arose as a result of the change of control at UBG where UBG is the controlling shareholder of both PPB and LLCB.
  • PSI has indicated its intention to privatise and delist UBG, PPB and LLCB from Bursa Malaysia Securities Berhad and expect the take-over and delisting exercise to complete in the first quarter of 2010.
  • The entire exercise, assuming full acceptances by shareholders of UBG, PPB and LLCB will cost PSI approximately RM1.4b.

MMSB, CHSB and PPES has on 8 January 2010 accepted PSI’s offer to acquire the entire equity interests in UBG from the respective companies, subject to, inter-alia the approval of the shareholders of the respective companies.

PSI intends to privatise and delist UBG, PPB and LLCB from Bursa Malaysia Securities Berhad and expect the take-over and delisting exercise to complete in the first quarter of 2010.

  1. RATIONALE
  • Following PSI’s first foray into the region by the formation of a USD2.5 billion JV with 1MDB, this is the second and separate initiative by PSI on its own to reaffirm its confidence and commitment to the economic prospects of Malaysia.
  • PSI has tracked the transformative phases of UBG as a player in the financial services sector, to that of construction and water infrastructure and more recently in the energy sector with keen interest.
  • PSI believes that the acquisition of UBG will give it an immediate and strong foothold in Malaysia covering all the right sectors where PSI can share synergies and knowledge with UBG, PPB and LLCB as a group.
  1. GOING FORWARD
  • If the privatisations of UBG, PPB and LLCB materialise, PSI intends to continue maintaining a high level of transparency and corporate governance in all 3 companies despite being out of public scrutiny.
  • PSI intends to add value to the UBG group in the long term and assures the companies that transition will be a smooth one. There will be no major changes to the management structure and PSI expects that the companies will continue “business as usual”.
  • With PSI’s expertise in the oil and gas sector, it hopes to bring on board more oil and gas technical competencies to assist UBG in extracting value from its current oil and gas investment in Thailand and identifying future investments in the sector.
  • PSI will reciprocally benefit from the construction and engineering expertise and skills of PPB and LLCB and could potentially open doors to these two companies in countries where PSI has presence, particularly in Saudi Arabia.
  • There may also be potential synergy between the UBG group and the PetroSaudi’s group of portfolio companies.
  • When the time is appropriate, PSI may invite other investors to share the upsides with the potential relisting of either UBG, PPB and/or LLCB.

These emails (of which there are many more) show that Mahony and his collaborators at “Project Uganda” were sharing information about the details of the 1MDB loans throughout 2010 and also about the buy out negotiations for UBG.

It indicates that the two deals were being linked by a team of the same people working on the same project under the code name Project Uganda.

Nik Faisal Ariff Kamil, 1MDB’s Chief Investment Office, over from his other job at UBG, was clearly one key member of the Project Uganda team in looped into these emails.

Another was clearly Jho Low.

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